In every business relationship there is the potential for conflict over contractual agreements or business operations. When such conflicts arise, there is no need to incur the onerous expense and delays involved in traditional litigation. There are readily available alternative dispute resolution procedures that will enable you to resolve your disputes relatively quickly, fairly and cost-effectively.

Resolving international disputes demands special skills, experience and cultural sensitivity. That’s why thousands of attorneys and their clients turn to JAMS. We are a recognized leader in cross-border mediations and arbitrations, with resources wherever you or your clients do business.

Colleges and universities need to manage, resolve and prevent conflict. As a worldwide leader in dispute resolution, JAMS is singularly qualified to provide a comprehensive range of unique and effective solutions for problems facing students, faculty and administration.

The JAMS ADR blog serves to engage our clients, the legal community and the public in a discussion about alternative dispute resolution. As leaders in mediation, arbitration and more, we strive to remain at the forefront of legal developments, trends and news in areas of law that pertain to ADR.

International commercial arbitration is one of the fastest-growing practices at JAMS. With industry leading rules, JAMS is praised for a highly experienced panel with specialties in many key areas, multilingual case management capabilities, and unparalleled service. JAMS specializes in the resolution of international disputes and is one of the largest providers of commercial arbitration in the world.

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Fees & FINRA

Following are two interesting and recent federal court rulings related to arbitration.

Award of Attorney’s Fees Associated with Motion to Confirm Reversed on AppealZurich American Insurance (as subrogee of Vinmar International) v. Team Tankers

Vinmar International chartered a ship from Team Tankers (TT). When the chemical shipped from Houston arrived in South Korea, it showed signs of yellowing, reducing its value.

Vinmar initiated arbitration pursuant to the charter agreement and the majority of the arbitration panel held that Vinmar was not entitled to relief. Vinmar moved to vacate the award on several grounds – manifest disregard of the relevant law and because the panel chairman had been diagnosed with a brain tumor prior to the initiation of arbitration, which he never disclosed and from which he died during the post-award proceedings.

The district court held that the panel had not manifestly disregarded the law, that the panel chair had not been guilty of “corruption or misbehavior” and that TT was entitled to “all costs of suit and attorneys’ fees incurred,” including the costs associated with moving to confirm. Vinmar appealed.

The United States Court of Appeals for the Second Circuit affirmed the district court’s confirmation of the award, concluding that Vinmar had failed to meet its “heavy burden” that the panel had manifestly disregarded the law. As to the failure to disclose the tumor, the Court wrote, “if an arbitrator’s failure to comply with arbitral rules, without more, could properly be considered ‘corruption’ or ‘misbehavior,’ the FAA’s grounds for vacatur would be precisely as varied and expansive as the rules private parties might choose to adopt.”

However, the Court found that the district court erred in awarding fees and costs incurred seeking to confirm the award. The Court found that the general rule that parties bear their own costs was not undone by the charter contract, because the contract authorized a fee award against a party that breached the charter as part of the non-breaching party’s damages. In this case, there was no finding or suggestion that Vinmar breached.

As to TT’s argument that the award was justified by bad faith during litigation, the court wrote “[p]erhaps something in the record could support a fee award under [the federal bad faith standards, 28 U.S.C. sec. 1927], but we have not found it, and the respondent carrier has made no effort to identify it. Accordingly, we must reverse the District Court’s award of attorney’s fees and costs.”

John Tracy and other Los Angeles-based financial advisors entered into employment agreements with Credit Suisse. Those agreements contained provisions requiring an internal grievance procedure followed by mediation, followed by binding arbitration in the event none of the other non-binding processes produced a settlement.

A dispute arose regarding amounts owed under a compensation hedge program and when the internal grievance process and mediation didn’t produce a result, Credit Suisse filed a demand for arbitration with an outside provider. Meanwhile, Tracy and his peers filed a demand with FINRA. Credit Suisse commenced an action to stay or dismiss the FINRA arbitration. Tracy argued that FINRA rules require arbitration with one of its own panels, but the district court granted Credit Suisse’s petition and Tracy appealed.

The United States Court of Appeals for the Second Circuit affirmed. It looked to FINRA rule 13200, which states, “Except as otherwise provided in the Code, a dispute must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person and is between or among ... Members and Associated Persons.”

After finding a conflict between the employment agreement and the FINRA rules, the Court turned to the question of whether the requirement of application of FINRA rules, including that the arbitration be conducted in a FINRA forum, could be waived by a pre-dispute agreement. The Court reviewed prior cases related to waiver of other FINRA rules, other arbitration provisions inside and outside the context of employment and concluded “Our case law leads to the conclusion that a pre-dispute private agreement to arbitrate before a non-FINRA arbitral forum is enforceable.”

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The JAMS ADR blog serves to engage our clients, the legal community and the public in a discussion about alternative dispute resolution. As leaders in mediation, arbitration and more, we strive to remain at the forefront of legal developments, trends and news in areas of law that pertain to ADR.

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